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G or ADP: Which Is the Better Value Stock Right Now?

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Investors interested in stocks from the Outsourcing sector have probably already heard of Genpact (G - Free Report) and Automatic Data Processing (ADP - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Genpact has a Zacks Rank of #2 (Buy), while Automatic Data Processing has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that G likely has seen a stronger improvement to its earnings outlook than ADP has recently. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

G currently has a forward P/E ratio of 17.28, while ADP has a forward P/E of 27.32. We also note that G has a PEG ratio of 1.73. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ADP currently has a PEG ratio of 2.41.

Another notable valuation metric for G is its P/B ratio of 4.45. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ADP has a P/B of 17.99.

Based on these metrics and many more, G holds a Value grade of B, while ADP has a Value grade of D.

G is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that G is likely the superior value option right now.


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